All about Power trading

Day-ahead trading refers to the trading of electricity for the following day, which takes place for example on EPEX Spot in Paris (Spot Market of the European Power Exchange), on EXAA in Vienna (Energy Exchange Austria), or in OTC (Over-the-Counter Trading) via contracts negotiated bilaterally. A less frequently used term for day-ahead trading is auction market.

You don't need to look far to find an energy-only market (EOM). Since power markets were liberalized in the late 1990s, the energy-only market has become a well-established market design in many European countries. In terms of the underlying concepts, an energy-only market is the opposite of a capacity market. An energy-only market only compensates power that has been produced. A capacity market, on the other hand, compensates the mere readiness, or capacity, for power production. To ensure supply is guaranteed, the energy-only market is supplemented by various flexibility options, such as control reserve markets. Beyond that, there are usually additional reserve models similar to a capacity market aimed at guaranteeing supply.

Intraday power trading refers to continuous buying and selling of power at a power exchange that takes place on the same day as the power delivery. In Europe, the largest intraday power exchanges are the EPEX Spot (European Power Exchange Spot Market) in Paris and the Nord Pool. It can also take place in an OTC trade (over the counter), which means off-market contracts negotiated between power buyers and sellers. This is also known as the short-term wholesale power market, especially in contrast to long-term power trading on the power futures market.

The liberalised electricity market includes many parties who all have to work together and at the same time try to make a profit. An overview of the most important players in our current system is given below.

Power trading refers to the act of purchasing and selling power between participants in the electricity sector. Various forms of power trading are possible depending on the market design, ranging from anonymous short-term spot markets to long-term over-the-counter markets. These markets allow trading of electricity between power producers, large industrial consumers, and electricity retailers before it is being delivered to end consumers. They are therefore often called the wholesale electricity markets.

A Power Purchase Agreement (PPA) is a power offtake agreement between two parties, being a (green) electricity producer and an offtaker of this electricity, such as an electricity consumer or trader. A PPA includes all the terms of the agreement, such as the amount of electricity to be supplied, the negotiated price, who bears what risks, the required accounting, and the penalties if the contract is not honored. As it is a bilateral agreement, a PPA can be adapted to the wishes of the parties involved, so the supply contract can take many forms. Electricity can be supplied directly or virtually via a PPA (see below).

Generally, a PPA is a long-term contract, such as ten or fifteen years. It (partially) removes the risk of fluctuations in the electricity markets, which is desirable for large, debt-financed projects. PPAs are also concluded for the continued operation of renewable energy installations when they no longer receive subsidies.

A growth in the number of PPAs is also visible in Belgium. An example is the PPA that Google concluded with Engie for the supply of offshore wind for its data center.